When it comes to deciding where to invest, some DSO leaders look to market trends outside the dental industry, like car sales, real estate and travel.
With several economic challenges facing the dental industry, many DSOs are shifting expansion strategies. Some executives have even predicted slower growth and mergers as DSOs look to scale back spending amid inflation.
Several DSO leaders have spoken to Becker's in recent months about how different economic trends and industries can help executives decide which areas may be valuable for new offices or how inorganic growth may be affected.
Beacon Oral Specialists CEO Mike Friguletto told Becker's that in addition to car sales and unemployment levels, he pays close attention to house sales and the real estate market to see which communities are growing in population.
"There is optimism that a real estate developer will be able to sell those properties, which means that there are people with jobs who can afford to buy those houses," he said. "To me, that's a very good indicator of if the economy is coming back. If we're looking at expanding in that community, that is a good sign because others are investing in it as well."
While mortgage rates and residential real estate prices surged in 2023, Forbes reported Feb. 15 that experts are optimistic mortgage rates will continue to drop in 2024. Sam Khater, chief economist at loan agency Freddie Mac, told Forbes he specifically anticipates a busier home-buying season in the spring.
Mortgage rates are currently sitting below 7%, while building permits for new single-family homes increased nationwide for the 11th consecutive month, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development. The National Association of Home Builders/Wells Fargo Housing Market Index, which tracks builder sentiment for positive construction conditions, also rose from 44 to 48 in February, Forbes reported.
DSO leaders are also keeping an eye on consumer spending. PepperPointe Partnerships President and CEO Greg White, DMD, told Becker's dental personnel leaving the industry could exacerbate staffing shortages and drive up wage inflation further, while less consumer discretionary spending can lead to a slowdown in same-store growth opportunities for DSOs.
However, Sage Dental Chief Marketing Officer Jonathan Kaufman told Becker's that consumer spending trends could point to a more optimistic outlook.
Many experts are confident in consumer spending for 2024 based on the surprisingly strong spending that took place last year. Investopedia reported that consumers are expected to continue spending, albeit at a slower pace, while business and manufacturer spending will likely slow down.
"The macroeconomy is at an inflection point and has been for around a year," Mr. Kaufman said. "Despite this, however, consumer actions do not seem to reflect an urgency to save or adapt. For example, we had one of the strongest retail purchasing years of the last decade, and airline travel around Thanksgiving was tremendous."